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Last year, the international newspaper under the guidance of the CEO Andy Silvernail, which introduced the streamlining initiative in May 2024 the top role in May 2024. In a September -September -September, SilVERNAIL at the Jefferie's Industrials Conference dug up the differences between the United States and the European markets in the changes and the differences between the United States and the European markets.
IP started the 80/20 optimization plan in 2024 and arranged a number of changes. “It is actually breathtaking if you look at the number of measures and the effects we had,” said Silvernail.
A year of us changes
Recently, Silvernail cited the three announcements that IP made at the same time on August 21: the sale of its global cellulose fiber business to the private equity company American Industrial Partners for 1.5 billion US dollars. The closure of four locations in Georgia, including two mills that affect 1,100 hours and employees. And invest 250 million US dollars to convert the No. 16 machine in the Riverdale Mill in Selma, Alabama, to produce containerboard instead of creating uncoated refreshment.
The Savannah and Riceboro containerboard mills in Georgia are “older or strategically inferior assets. In our business, strategically inferior assets are simply a problem” with “terrible returns on capital,” he said. Keeping Savannah open would have needed large repairs with a price of around 300 million US dollars, and that still would not have managed the desired returns in the line, said Silvernail. Instead, the 250 million dollar investments in Riverdale are not only cheaper at the front, but also achieve better returns in particular, he explained.
The attention of below -average assets is particularly important in difficult economic cycles, he said. In the past, there was one reason that the capacity is not necessary if the market comes back. But in reality when a market comes back and “you actually map it over the cycle, he never earns money with these crappy assets,” he said. “We would rather run closely than to walk easily through a cycle.”
The removal of fewer desirable assets promotes resources that can be invested in services. “That is why you saw an enormous increase in our service providers in the United States as part of the optimization plan.
The strategy shifts reinforce “No. 1, we are a packaging company and just a packaging company,” said Silvernail.
Historically, IP was a broad fiber company with up to nine business units and a large, centralized structure, he said. “We blown up the centralized structure last year. We radically decentralized ourselves in order to be closer to the customer. And we really focus on packaging.
A pure packaging company is a less volatile business model, he said. “When you look at the market and take the paper-based companies and actually look at the capital returns, those who are packed compared to everything else are not even nearby.”
In the US market conditions in general, Silvernail forecasts an improvement that will soon come. The current demand appears “much closer to a lower or more difficult moment than I can imagine in the future,” he said, adding that it is difficult to believe that things would be no different in two to five years.
Start changes in Europe
This year, IP started his transformation of 80/20 in Europe after the takeover of DS Smith in London. The aim is to remove 500 to 600 million US dollars in this region. The European restructuring plan is approximately 80% similar to the US plan, but there are some differences, said Silvernail.
The level of integration is an example, he said and found that the United States is almost completely integrated, while Europe is only 50% integrated. The goal is to be more integrated in Europe, but this will happen by optimizing existing assets instead of buying new ones, he said.
The cost reduction through furnishing closures takes longer in Europe, since the requirements for a “consultation process” to explore alternatives and not the US model of the simple execution will research, he said.
It was positive that the Legacy DS Smith business in Europe was more customer-oriented than IP in the United States, so that less work has to be done there, said Silvernail. Europe is also an innovative market, he said.